The chancellor’s autumn statement was rhetorically quite adroit. It remains within the ‘narrative’ established by the coalition when it was formed – that Britain’s debts were at unprecedented levels, and as such there was no alternative to paying them off as fast as possible. Anything else would lead to our being no better than Greece, Spain or Italy. The happy consequence of drastic debt repayment is that yields on British government debt are as low as Germany’s (true, but not because of debt repayment) and much lower than the decrepit Mediterranean states. That the ‘size’ of Britain’s debt is largely folk myth doesn’t alter the fact that the perpetuation of the myth is consistent with everything the government has already said.

Furthermore, the statement associates itself with now widely accepted criticisms of the British economy: it is seriously unbalanced; the workforce is relatively unskilled; small business is starved of money and the banks are partly responsible; there are major deficiencies in the country’s infrastructure. Thus much of the detail of the statement is about the government’s proposals for repairing the weaknesses; and some of the proposals are very sensible. A veil of silence, however, is cast over the part the Tories themselves played in this sorry story.

The tone of the statement is also to some extent Lib Dem-ish. It is couched in terms of ‘fairness’ and opportunity. The government will protect the poor and aged. The reskilling of the workforce, especially the young, will sustain the social mobility that Clegg has insisted is one of the main ambitions of the government. Everything will be done to encourage small business which, it is conceded, sometimes cannot compete with German small business. Much of the detail is designed to be creative and positive, to obscure the statement’s downside.

There is certainly a downside: it is clear that all money spent is to be matched by money ‘saved’ – though where and how is not revealed. There will therefore seemingly be no addition to aggregate demand or to net investment. In which case all the infrastructural expenditure and assistance to small business could be irrelevant. Some ‘savings’ are intended to be permanent and Osborne is open about them: the eventual raising of the retirement age to 67 is one. Most depressing is the decision to cut further the real income of public sector workers, which, despite what is said, is unfair and represents yet another attempt to control wage settlements in the private sector via a discriminatory tax on public sector workers. In the past all such attempts have ended in tears.

Almost as depressing is the decision to sell off social housing to existing tenants at discounts of up to 50 per cent. The proceeds, the chancellor says, will go to the construction of new social housing. But if current social housing is sold off hugely underpriced it must mean a net reduction in the stock of social housing since the financial return is below replacement level. This is exactly the kind of political manipulation of the housing market that has landed us in so much trouble in the past, and it is almost unbelievable that we are to be sentenced to that treadmill yet again. This is part of the Tory tone of the statement; one of several. The government wishes to encourage yet more ‘flexibility’ of the labour market – a dog whistle that everybody can hear – and the chancellor has decided yet again to limit petrol duties in the interests of the hard-pressed motorist. Short-termism if ever there was any.

Unless the chancellor has a rabbit up his sleeve it appears that the net effect of the statement must be deflationary. In which case the prediction of 0.9 per cent and 0.7 per cent growth in the next two years – itself miserable enough – could be thought optimistic.

Comments on “Osborne’s ‘Savings’”

tory spokespeople (such as michael fallon) seem concerned to represent low yields as both a feature and a sign of the fundamentally favourable state of the economy, and to be using the interpretation of them as a sign to argue that we should strive to maintain them as a feature

‘Nobody claims that the current levels of debt is the problem.’ Here’s the Daily Mail a couple of weeks ago:

David Cameron admitted yesterday that shrinking the nation’s debt mountain is proving harder than expected… ‘Yes, getting debt under control is proving harder than anyone envisaged. High levels of public and private debt are proving to be a drag on growth, which in turn makes it more difficult to deal with those debts,’ the Prime Minister said.

And here’s Osborne’s statement to Parliament:

our debt challenge is even greater than we thought… In that Budget we set out a tough fiscal mandate – that we would eliminate the current structural deficit over the five year forecast horizon… We supplemented the mandate with a fixed debt target – that we would get national debt as a proportion of national income falling by the year 2015-16… We are going to see Britain through the debt storm.

And McKibbin says:

The chancellor’s autumn statement… remains within the ‘narrative’ established by the coalition when it was formed – that Britain’s debts were at unprecedented levels, and as such there was no alternative to paying them off as fast as possible… That the ‘size’ of Britain’s debt is largely folk myth doesn’t alter the fact that the perpetuation of the myth is consistent with everything the government has already said.

or as Osborne did that they ” would eliminate the current structural deficit over the five year forecast horizon… We supplemented the mandate with a fixed debt target – that we would get national debt as a proportion of national income falling by the year 2015-1″

is completely different from McKibbin’s claim that they are saying our debts need ‘paying off’ or that we are either engaged in or that anyone has proposed ‘drastic debt repayment’.